GOME announced stronger-than-expected earnings results in 2013

Special Dividend Declared; Dividend Payout Ratio Increased to 40%
GOME to “Build another GOME” with Open Supply Chain

  • Profit attributable to the owners of the parent company surged to RMB892 million, up 222.5% y-o-y
  • Sales revenue amounted to RMB56,401 million, up 10.4% y-o-y steadily
  • Consolidated gross profit margin remained at high level of 18.4%
  • Declaration of Special Dividend in 2013; dividend payout ratio increased to 40% starting from 2014

Hong Kong, 2014-3-24 — /EPR Retail News/ — GOME Electrical Appliances Holding Limited (HKSE: 493, “GOME” or “The Company”, together with its subsidiaries, “The Group”) today announced the Group’s audited consolidated results for the 12 months ended 31 December 2013. Benefitting from its strong supply chain advantage, the Group recorded sales revenue of approximately RMB56,401 million, up 10.4% year-on-year. In 2013, the Group’s profit attributable to the owners of the parent company surged to RMB892 million, demonstrating its sustainable profitability.

Declaration of Special Dividend; Dividend Payout Ratio Increased to 40%
To share the Group’s operational achievements with its shareholders, the board of directors of the Company (the “Board”) recommended that (1) to declare a 2013 special dividend of HK$2.0 cents (equivalent to RMB1.6 fen per ordinary share); (2) to declare a final dividend of HK$1.3 cents (equivalent to RMB1.0 fen per ordinary share) in accordance with existing dividend policy; (3) to increase the dividend payout ratio from not more than 30% to 40% of the Group’s distributable profit starting from 2014.

GOME to “Build another GOME” with Open Supply Chain
GOME also announced that the Group will upgrade its strategy to become a “Omni-Channel Retailer” from 2014; meanwhile, the Group will open up its low-cost high-efficient supply chain to its business partners to assist in all sales processes, including transactions, settlement, logistics services, after-sales services and support for membership integration and mobile payment, for retailers of all channels, including online and offline retailers. The Group is working towards to achieve its goal to “build another GOME” by 2017.

During the reporting period, riding on the supply chain advantages that include strong procurement, logistics and IT, etc., the performance of physical stores improved further with the sales revenue from comparable stores growing at 13.7% YOY, far outweighing the industry average. The Group’s consolidated gross profit margin remained at a relatively high level of 18.4%; and operating expenses were also optimized effectively.

The low-cost high-efficient supply chain, with strengths in procurement, logistics and IT, contributed to the Group’s strategic success in 2013 and also form solid foundation for GOME’s “Open Omni-Channel Retailer” upgrade strategy. During the reporting period, the Group continued to optimize its store network, opening 93 stores and closing 126 others, bringing the total number of stores (including Dazhong Appliances) to 1,075 in 260 cities across China. The Group also tightened its control over operating expenses through sub-letting and lease termination. Operating expenses as a percentage of sales revenue fell from 18.2% in2012 to 16.6% this year.

With the improved efficiency in its supply chain, the Group has solid cash position. Cash and cash equivalents amounted to approximately RMB9,016 million as at 31 December 2013, up by a significant 27.6% compared with RMB7,067 million in the previous year. The Group’s net cash flows generated from operating activities amounted to approximately RMB1,995 million.

“Omni-Channel Retailer” Upgrade Strategy to “Build another GOME” by 2017 The rapid development of mobile Internet and the prevalence of e-commerce bring an opportunity for the upgrading of GOME’s “Open Omni-Channel Retailer” strategy. Having identified the trend of fragmented consumer behavior in which the consumer chooses “consumption value” from “consumption channels”, GOME will leverage on its valuable platforms, featuring its low-cost high-efficiency supply chain management capabilities as the core competitiveness of GOME.

The Group believes that in the future, its low-cost high-efficient supply chain will continue to boost the Group’s performance and help the Group achieve its goal to “build another GOME” in 2017. GOME will tap into opportunities in mobile Internet development focusing on three strategic priorities under the “Omni-Channel Retailer” strategy to enhance its retail value platform and refocus the crux of its retail business.

  1. Open Supply Chain Tactics: through its Open Procurement Platform, Open Logistics Platform and Open IT Cloud System, the Group will strengthen the MVNO, Accessories and Warranties sectors to enhance consumer loyalty and build up its nation-wide supply chain management services.
  2. Store Network Tactics: GOME will continue to upgrade its store merchandising displays, low price experience and O2M shopping experience to improve in-store turnover. As for the network development, the Group will continue to optimize its store network in first and second tier cities, enhance cross-industry alliances with department stores and supermarkets, etc.. In the third and fourth tier cities, the Group will open new stores and provide supply chain output operations while closing underperforming stores and adjusting inefficient stores.
  3. E-commerce Tactics: the Group will improve the pre-sale, sale and after-sales services to enhance the online shopping experience; strengthen competitive edge in the integration of Online and Offline and the comprehensive supply chain; and win the price competition with the Online/Offline guaranteed under lowest price policy. In addition, the Group has also proposed five major online initiatives, including: online/offline price match, differentiated products, delivery and installation service, major offline models and offline product support.

Mr. Wang Junzhou, CEO of GOME, concluded, “Adhering to the essence of ‘Openness, Collaboration, Sharing, Win-win’ internet thinking, the Group has decided to engage a comprehensive upgrade strategy from being a “multi-channel retailer” to an “Omni-Channel Retailer” which can establish more intensive and effective retail tentacles with an open and wide-range terminal interface to fully meet various needs of different channels and a diverse range of customer groups.

The strong results achieved in 2013 demonstrate the validity and effectiveness of the ‘open supply chain to support GOME’s long-term sustainable earnings’ strategy. This has also strengthened the Group’s confidence in fully implementing the ‘Omni-Channel Retailer’ upgrade strategy. Under the leadership of the Board and the management, we believe that GOME will seize opportunities in the mobile Internet era to gradually become China’s largest and most professional Omni-Channel Retailer, and to generate maximum returns for shareholders and consumers.”

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About GOME Electrical Appliances Holding Limited
GOME Electrical Appliances Holding Limited was listed on The Hong Kong Stock Exchange in July 2004 (HKSE: 00493). The GOME Group was founded in China in 1987 and is engaged in the retail business of electrical appliances and consumer electronics in China. It is the largest retail chain of electrical appliances and consumer electronics and the largest retail chain enterprise in China.

Please visit our website for more information: www.GOME.com.hk.

For further enquiries, please contact:

Hong Kong

Hill+Knowlton Strategies Asia
Samantha Wang Candy Chan
Tel: (852) 2894 6266 / 9418 0271 Tel: (852) 2894 6246 / 9715 8681
Email: samantha.wang@hkstrategies.com Email: candy.chan@hkstrategies.com

Beijing

Helen Song
Tel: 86-10-5928 8815
Email: songjie6@GOME.com.cn